Source: Gasgoo Author: Ramy
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Volvo Cars shares jumped more than 26% on 1 February after announcing that it would stop providing funding to its subsidiary Polestar (Polestar Automotive).
According to the London Stock Exchange, or LSEG, Volvo announced that it may hand over the management of Polestar to its majority shareholder, China Geely Holding, which holds a 78.65 % stake in Polestar.
In its 2023 results report, Volvo noted that Polestar “is entering the next exciting phase through enhanced business plans and cost actions,” but that Geely Holding’s focus will be on growing Volvo Cars and concentrating its resources accordingly.
“We are therefore evaluating Volvo Cars’ shareholding in Polestar and looking at the possibility of making adjustments, including a share allocation to Volvo Cars’ shareholders. This could result in Geely Sweden Holdings (GSH) becoming a significant new shareholder.”
Image source: Polestar Automotive
Volvo Cars CEO Jim Rowan said it was a “natural evolution” of the relationship between the two automakers.
According to LSEG, Volvo Cars now owns about 44 % of Polestar after acquiring the company in 2015. However, Polestar has struggled since its June 2022 IPO, so analysts fear the company will become a drag on Volvo.
“Now is the right time for Volvo Cars to start reducing its stake in Polestar so that Polestar can look for funding outside of Volvo,” Locke said, “This allows Volvo to fully focus on its own growth journey, especially on some of the technology investments that need to be made in the next two to three years. “
Polestar said on the day that it “welcomes Geely Sweden Holding as a potential new direct shareholder” and that Volvo Cars would “continue to be a strategic partner in the areas of research and development, manufacturing, after-sales and commercial”.
Thomas Ingenlath, CEO of Polestar, said, “Polestar is in one of its most promising phases of development as we continue to grow our line-up of exclusive performance cars. We look forward to continuing our co-operation with Volvo Cars and realising even greater synergies with Geely in terms of future-proof technologies”.
Additionally, Volvo Cars reported a stronger-than-expected increase in operating profit (excluding joint ventures and associates) in the fourth quarter of 2023 to SEK 6.7bn ($643.83m), compared to SEK 3.9bn in the same period in 2022. Fourth-quarter revenue was SEK 109.4 billion, compared with SEK 105.2 billion in the same period in 2022.
For the full year 2023, Volvo’s operating profit climbed to SEK25.6bn from SEK17.9bn in 2022, on revenues of SEK399.3bn, up from SEK330.1bn the previous year.
